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Mad Money

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China 12, Cramer 11, Europe 9, Us 8, Ross 7, Britain 7, Washington 7, California 5, Vernon 4, London 4, Mr. Cramer 3, John 3, Vernon Hill 3, Lucent 3, U.s. 3, America 3, Quakertown 3, Greece 3, Alcatel Lucent 3, Sears 3,
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  CNBC    Mad Money    News/Business.  (2012) New.  

    November 26, 2012
    6:00 - 7:00pm EST  

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>> yep! >> we will see you tomorrow at 2:00 p.m. for "street signs." and catch "fast money" at 5:00 p.m. eastern. "mad money" is beginning right now. i'm jim cramer. and welcome to my world. you need to get in the game. firms are going to go out of business and he's nuts. they're nuts. they know nothing. i like to say there is a bull market somewhere. "mad money" you can't afford to miss it. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just frying to save you money. i'm trying to educate you. call me at 1-800-743-cnbc. which day is real? last friday when the market zoomed higher firing on all cylinders, or today? when the market got hit? the dow sinking 42 points, the
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s&p falling .2%. the nasdaq eked out a gain. thank you, apple. frankly, it's a little bit of both. friday's fabulous session for the bulls represented everything that could go right. all the good things that might be able to come true, something that if it happened would send us much higher still. >> house of pleasure. >> but today's session, it was all about realism. recognition that all is not well. and we better be really careful or we can give up a lot of these terrific gains. >> the house of pain. >> the contrast explains a ton of what's happening now. let's tick down what really drove friday's rally and what could take us down from friday. first, oh, boy. we came in on friday with a full head of china steam. the managing reports out of china represent nothing short than a wholesale shift in business activity. it's clear something mayor is happening in the people's republic. the government after being worried about inflation has
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clearly gottien growth religion which is why you seeing expansionary numbers. buying the fxi. proxy for the chinese stock market is the way to play this turn. i think you should be buying it, too. >> buy, buy, buy. with china growing, a host of stocks can go higher. everything from nike, seems really good right here, yumm brands. remember the kernel. joy global. a huge swath of the economy, i can't stress how important this trend might be. hey, let's take the rails. >> all aboard! >> they've been horrendous in large part because of decline in coal shipments to our power plants which are nat gas. china is building hundreds of coal burning plants. when electricity is used, you'll see stocks like csx and norfolk southern start to bottom. you know what? i think they bottom now. just how powerful is china? consider this. last week we had a truce between the israelis and gazans. it took people by surprise. how can it stay high given the
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sudden ephemeral peace? oil didn't fall. that's because of rapacious chinese demand. there's europe. deal talks were in the air friday. that means a day when the industrials that had so much riding on return to growth in europe could blossom. they were some of the best actors out there. good news for europe, still good news for the international u.s. banks. they went up, too. jp morgan, goldman sachs. retail. we got terrific news on friday. initial returns from the black thursday which used to be black friday, tremendous. we found out that walmart was forecasting the biggest pre-holiday buying ever. with $1 billion a day in sales. they ought to know, they weren't alone. finally there's washington. we headed into the weekend with lots of talk. lots of talk about good feelings. good feelings over possible deal to avert the fiscal cliff. republicans seem to be breaking ranks with the hardliners. talk about maybe raising revenues if the democrats will be willing to do meaningful entitlement reform. that positive tone, the rising
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above, helped move up the futures right into the bell. who wanted to be short ahead of a weekend deal? what a difference a day makes. this morning we come in, what are they chattering about? greece. greece. can you believe greece? it's standing in the way of a european deal again. this small country with no grip on its finances has europe hostage all over again. without a deal, everything in europe came down last night. we didn't get a sunday night easing from china. worried that the recent positive data can't be maintained without more interest rate cuts. you know what, we've been conditioned to believe weaker economic data means more stimulus, which leads to higher stock prices here. what happens if the news isn't so good that china becomes a big importer of our goods again but isn't so bad the chinese government feels the need to cut rates? maybe that's where we are. hence why the chinese markets came down, cooling the china bowls. finally, there's the letdown in the united states. a deal on the fiscal cliff, the
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foes of compromise. the enemies of compromise were out in full force in the last 48 hours. all vying to be on the "mad money" wall of shame anti-compromise annex. paul krugman in today's "new york times" calling the fiscal cliff a menace, that doesn't need addressing. krugman is calling for demonizing all those he thinks are scaring people into austerity. no cuts for him. he's no fan of rising above, either. wrote it himself. on the other hand, there's college classmate grover norquist, the anti-tax crusader who came out swinging this weekend reminding republicans who signed the no new tax pledge to not discuss impure thoughts if they talk about taxes on national television. i know important apornography w it. it made it very clear that any republican who signed the pledge, that's pretty much every republican in congress, who balks at someone whose career is over. to me, that meant the defectors
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are far and few between. as a moderate leadership cannot deliver those pledge to the norquist hardline. norquist who seems to welcome a bust on the wall of shame, used to beg for it, is more powerful than speaker john boehner. norquist is more powerful than boehner. it feels as if the air went out of the compromise zeppelin. hey, like the graph zeppelin, like, lakers. retail, now we're hearing that there wasn't as much follow-through to the initial sales from thursday night. i think it's nonsense, but mo macy's and costco were tagged with huge loss es today. i believe the holiday sales are far are flat-out strong. amazing numbers from apple, like a rocket since it hit the 505 level last week. terrific ipad mini sales. wasn't that a product the doom and gloomers had rin owritten o still born a few weeks ago like the iphone 4, by the way? i believe the chinese momentum is lasting. europe, total black box. one being minimized in its importance for american
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companies. the fis acal cliff, i saw a ste backward in positions. those who think rising above is a political judgment, when it is a judgment about the need to rid washington of politics. that even a fool knows it's ruining this great country. bottom line, get a deal on the fiscal cliff, we go higher, maybe much higher, aided by chinese strength. we don't get a deal on cliff, we fail to rise above and we go down with europe providing the accelerant. how about john in missouri? please, john. >> caller: big boo-yah, jim, of missouri, home of the not doing so great kansas chiefs this year. >> chiefs, i got it tell you something, hail to the chiefs and the eagles. >> caller: there you go, man. hey, kcg, had a little pop in the market today. and i know we're negative .41 p/e ratio and well below the 52-week high. i'm about to the break even
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point. is it time to get out? >> it's a lottery ticket. my friend, tommy joyce, a terrific guy, it's not about friends, it's noabout money. tommy is my friend from college. it's a lottery ticket i would hold on to. by the way, i'm thinking about playing powerball, too. you see the size of powerball? i mean, how could you not? i mean, like, hey, you know what, i don't believe in the lottery. at that price, call me a believer. how about jeff from florida? jeff? >> caller: hey, jim. i saw facebook was up today, but knowing that the new ad blocker app has been released for android devices, how is that going to effect the company? >> it's going to be okay. facebook has the sponsored story thing. really good piece by sanford bernstein today about facebook. that guy hated it when it was right to hate it. he told you to stop hating it at the bottom. tells you to buy it below here. he's my guy. i believe in facebook at these levels. my kids were on facebook a lot this weekend. okay. how about joe in mississippi? joe?
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>> caller: hello, jim, how you doing? >> hey, doing pretty well. how about you? >> caller: good. okay. mmr, had a rough day today. down 22.5%. >> this one is too hard. it is just entirely a speck play on this davy jones locker, davy jones, well, i'd rather, you know -- sleepy dreams. show what i mean here. no. mmr, hold it until it goes back over 10 then sell it. i think i'm done waiting for mmr to go to 25. i need bob in massachusetts, please. bob? no doubt a patriot fan. bob? >> caller: yes, i am. and mr. cramer, a big holiday boo-yah from massachusetts to you and your staff out there. >> oh, my staff, yeah, turkey day for my staff. thrilled. we had a great, great -- all of us had a great thanksgiving. thank you very much. what's up? >> caller: i have a question about cedro. you spoke about cedro a couple months ago. it pulled back off its highs. has an 8.5% yield on dividend.
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over the past three years they've been raising dividend. they reported earnings today and reported earnings of 216 million, up from 58 million from last year at this time. street was looking for a little over $1 billion. would you consider pulling the trigger now on this -- >> let people downgrade it. let people downgrade it then i would say buy. because i did more work after saying i didn't like it because i didn't think they could raise that dividend. i think after they downgrade it tomorrow in the numbers or cut the numbers, you do some buy. all right. who's right? friday's rally? monday's selloff? what a difference a day makes. the answer depends on, once again, washington. china's getting stronger. time for congress to rise above. "mad money" will be right back. coming up, digging for a discount? the holiday shopping season's in full swing, but there's one big sale item that wall street may have overlooked. cramer's got the deal. and later, ready, set, shop.
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consumers have been clicking away this cyber monday. while most shoppers are spending, cramer's helping you cash in on one stock that could deliver delightful returns. plus, breaking the banks? they are a leading force in the markets clines and declines. tonight cramer is diving into the financial sector with one of the industry's founding fathers. looking to break into the banks? don't miss this exclusive. all coming up on "mad money." don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer. #madtweets. send jim an e-mail to madmoney@cnbc.com. or give us a call. at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com.
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♪ thanksgiving's come and gone. and the holiday decorations are now out just about everywhere. which can only mean one thing.
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it's shopping season. we've already gotten reports sales on black friday were generally strong. with the usual insanity of people trampling each other. a guy in texas pulled a gun when somebody cut ahead of him in line. this is an unusual moment. we had a monster rally on friday. today the averages got -- they dropped a little bit. of course, why? more worries about this darn fiscal cliff. that could send the economy into recession if washington doesn't make a deal to soften the draconian spending cuts. and the tax increases by the end of the year. i say could, meaning i believe it will. we need to take a cautious approach when it comes to retail because of the cliff. a lot of retailers are running right now. but we want to own something that won't be hurt too badly if we do go over the cliff. a stock that's pulled back dr dramatically of late. i'm talking about rost stores.
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r-o-s-t. two off price retail concepts we can't get enough of here on "mad money." rost is an off price play like tjx, another strong, strong player. where people go to get terrific deals on merchandise that's been marked down dramatically. the company's pretty much immunized against a fiscal cliff. well, at least one that induces a recession. consider since 2005, ross stores has had only a single quarter of negative same-store sales growth during the great recession in 2009. just one quarter. that's an incredibly consistent record. even if washington messes up which we certainly think they could do -- ♪ -- and sends us back into a recession, this company, i think, will do fine. we know because they were fine during the last recession. that was much worse than what the fiscal cliff can potentially throw at us. not only can ross stores transcend the fiscal cliff, it is a cheap stock used to what i'm used to it being. ross traded around $70 another
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t at the very end of the summer. now $56 and change. vanished. down about 20% from its highs. in part, the stock got slammed along with everything else as people became worried about the economy as the fiscal cliff loomed closer and closer. beyond that, ross stores has been a victim of expectations. i always say guidance is more important, expectations is is more important. when the company reported a week and a half ago on november 15th, investors were expecting them to -- why? because this company always beats and then always raises. >> house of pleasure. >> but they gave disappointing guidance the fourth quarter. plus some analysts worry the company's same-store sales have now decelerated for two quarters in a row. these are legitimate worries. however, after this quarter that many considered to be disappointing -- [ crying ] ross stores only sold off another point and a half and since then rebounded back where it was before it reported. there's only so far it could
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fall on a not so hot quarter at least. as for the worries about decelerating same store sales, i think they're overblown. the company was up against difficult comparisons and 6.5% increase in same-store sales. we don't have a lot of high single digit gainers. the weak guidance, hey, listen, in my view the company was being conservative. i think they're practicing underpromise/overdeliver. ross stores should be able to beat the estimates the next time they report. that could drive the stock higher. at the end of the day ross stores is still one of my favorite growth stories in the whole retail universe. you're getting a chance to buy it at a discount. what makes ross so great? first of all, you know how much i harp on this thing. it's right. this is a regional to national growth story with not one but two terrific concepts. company has 1,097 ross dress for less stores. the difference between the two is that the stuff at dee dee's
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is cheaper than ross dress for less. right now the ross dress for less stores are in 33 states. although they're mostly concentrated in california and the southern parts of the country. while dee dee's discount is just in eight states. company's goal is to ultimately add another 1,000 ross dress for less locations and 500 more dee dee dee's discounts. ross has plenty of room to expand. second, the company has a terrific business model. you know what they do? they buy unsold merchandise from regular retailers like department stores at deep discounts. when the companies are anxious to unload excess inventory at the end of the season, ross will pack the stuff away, store it for nine months and put it on the floor when it's relevant again. the backaway strategy as they call it allows the company very opportunistic about buying merchandise from stores that bought too much away from them. thanks to manufacturer overruns, chanc chan canceled orders, and the merchandise in the stores for
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hurricane sandy that didn't sell, that left retailers with much too much inventory in the northeast and it's dated inventory. third, ross stores is a big beneficiary from the collapse. yes, i do not use that word lightly, from jcpenney. it is now taking a huge share from the disorganized dysfunctional penney to the point management called this out on the conference call. the other guys have been reluctant to do that. speaking of the conference call, company -- now that we're entering gift giving season, as a quarter of ross' merchandise is oriented arounded home and recovery means they're selling a lot more furniture. ross stores is a shareholder friendly company. they have a small dividend, okay? one that yields just 1%. the company's consistently increased that dividend. every year for the last 18 years. most recently, 27% boost back in january. beyond that, ross has brought back a huge amount of stocks since 2005. i was astonished to see they've retired 25% of the shares outstanding over the last seven years.
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that's a serious buyback. company still has about $560 million left in its repurchase, reauthorization it can use until the end of the year. i bet you they take advantage of the big drop and stand there buying the stock. after the recent selloff, how expensive is it? 14.5 times earnings. that's a big discount. it's barely above the company's long-term growth rate of 13%. that's too cheap to ignore. here's the bottom line. if you're looking for a retailer to own this holiday season, after this discount, you know, you got to look no further than ross stores. it's relatively immunized against fiscal cliff which we need, right, but a we may not rise above. after the latest selloff, the stock is dirt cheap. that's why ross stores is a buy, especially into this kind of weakness. after the break, i'll try to make you even more money. coming up, ready, set, shop. consumers have been clicking away this cyber monday. while most shoppers are spending, cramer's helping you cash in on one stock that could
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deliver delightful returns. all coming up on "mad money." having you ship my gifts couldn't be easier. well, having a ton of locations doesn't hurt. and a santa to boot! [ chuckles ] right, baby. oh, sir. that is a customer. oh...sorry about that. [ male announcer ] break from the holiday stress. fedex office. we don't let frequent heartburn come between us and what we love. so if you're one of them people who gets heartburn and then treats day after day... block the acid with prilosec otc and don't get heartburn in the first place!
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make your mark with ink from chase. to a world of super-connected intelligence. the potential of freescale unlocked. nyse euronext. unlocking the world's potential. to investing with knowledge. the potential of td ameritrade unlocked. nyse euronext. e world's potential. this is the biggest day of the year for shopping on the web. your inbox has been overflowing with cyber monday deals like mine has. all sorts of online retailers, all day. tonight i'm going to tell you the best way to play this. no, i'm not talking about amazon or ebay or that sort of --
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although both of those companies' stocks performed fabulously today. no. you want to profit from online shopping, you do it with federal express. because no matter what website you buy stuff from, the one thing all internet purchases have in common is they have to be shipped to your house or office. that's where fedex comes in. make no mistake. the number of people buying things online is still growing dramatically. i'm always amazed at these numbers. according to the national retail federation, 129 million consumer expected to shop online today. that's up from 122 million last year. look at the com score data, they keep track of the stuff. online sales for november to date are are up 16%. numbers from ibm, online sales were up 20.7% on black friday. that's enormous. this is the busiest time of year for packages. this trend isn't just about the
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holiday season. part of a broader shift as people buy fewer things from old-fashioned bricks and mortar retailers and more stuff off the internet. they just look at the best buy, okay? meanwhile, as this is happening the u.s. postal service is scaling back its operations because it's completely broke. that means more business for shipping companies like fedex. why federal express rather than united parcel? u.p.s., pretty good outfit. fedex came out with a one-two punch of disappointments in september, reporting a quarter they missed even as already lowered expectations. the slowing global economy crushed the company's international express business. even as the more profitable ground shipping side of the business did better. however, there's a positive side to fedex's disappointing numbers and it's this. they reset expectations down to a lower level where they could be beaten in the future. like ross stores. that's how fedex is now actually trading slightly above where it was when it preannounced to the downside on september 4th. the real catalyst, though, fedex
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announced a major restructuring on its analyst day on october 10 preside 10th. i pick it regularly on my charitable trust. think of fedex as the ultimate self-help story. in some ways fedex, it's a mess. fixing that mess is what the restructuring is about. the company decentralized the two separate networks, one for slower ground shipping, one for faster express shipping. fedex is massively consolidating its ground and express segments to make them more competitive, more profitable on a per package basis. goal, increase their income by $1.7 billion by the end of the 2016 fiscal year. i thought that was a large number when i heard it. every $500 million increase in operating income translates to $1 a share increase. so this plan could eventually boost the company's earnings power by roughly $3.40. most restructurings don't matter to me. this one does.
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you're dealing with $6.44 number as a basis here. in order to get there, the company plans aggressive head count reductions. what are they going to do? that's euphemism for firing people. they also restructure their shipping network and aircraft fleet. most are going to come in the 2015 and 2016 fiscal years. half the head count reductions and third of restructurings happens in fedex's 2014. the benefits from the plan could be a whole lot closer than they appear now. once the big turnaround is done, fedex intends to increase its dividend. it yields a meager pnlt 6%. u.p.s. has a bigger dividend. the great thing about this plan is it's so big. it is so ambitious. the economy slows down, courtesy of the fiscal cliff. fedex will still have a reason to go higher because of the restructuring. because we know the company's already cost cutting its way to better earnings. fedex also is a china kicker and we like that.
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company gets 30% of its sales from overseas, mainly from asia. but also some europe and latin america. you know, i think the chinese economy is in the process of coming in for a soft landing which is incredibly bullish. look, this weekend we got more positive data from china. now that the leadership transition has happened in the communist party, i think the chinese government could be more aggressive about stimulating the economy since they seemed to have got their inflation situation whipped and a rebound in china's economy, what a reason to own fedex in itself. last but not least, i think fedex is worth buying here because the price is right. at the moment the stock is trading at 11 times earnings. we're 20% below where u.p.s. is trading. it isn't that much better. u.p.s. is not that much better than fedex. remember, fedex soared when we heard about the restructuring. ever since the election it has pulled back along with the rest of the market to the point where it's now almost back to where it was before the announcement. it's time to buy, people. bottom line, you want a real cyber monday deal, go buy
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yourself -- >> buy, buy, buy. >> -- some federal express. robert in illinois. robert? yo, robert? >> caller: praying for the eagles tonight. >> yeah. we need divine intervention. good you pointed that out. what's up? >> caller: electronic gear this holiday season, and i think this stock has a lot of upside due to the increased volume of sales at this time of year. the stock is skul. >> i felt it's too much of a commodity. i don't like stuff that's sold in those particular stores that they're there. i've been recommending the sales of skullcandy, around since 14, 15. the stock did go up to 16, made me look back momentarily. i stuck by my guns. i still think you should sell skullcandy. fernando in california. fernando? >> caller: [ inaudible ]
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>> okie doke. >> caller: coming into the fourth quarter for holiday season with all the names it picked up. >> all right. sears on its own, if it didn't have eddie lamperts backing, sears is a company, i consider it a wasting asset. i say that because its sales keep going down. i mean, there's no way -- it's very difficult to turn around a sales decline. as long as they go down, i can't recommend it. i mean, because it's not -- you can't recommend retails in asset play anymore. there's too much real estate as it is. all right. dotcom, dot-christmas, dot-hanukkah. the way to play cyber monday. the growing shift online. don't overthink this, people, it's fdx. don't move. "lightning round" is next. it's a brutal full contact sport. >> from the time the whistle blowses. >> traders bracing for what
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could be a wild session. >> to the last play of the game. >> markets absolutely getting hammered today. >> i know it's not easy, but i promise to keep fighting for you. >> jim cramer, leveling the playing field for all. >> the road is a tough one, but the payoff can be your greatest win of all. >> join "mad money's" training camp weeknights.
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it is time. it is time for the "lightning round." cramer's "mad money." you say the name of the stock. i tell you whether to buy, buy, buy, sell, sell, sell. on the fly. we play this sound. and then the "lightning round" is over. are you ready, skee-daddy? start with the "lightning round." cramer's "mad money." i want to go with john in michigan. john? >> caller: boo-yah, mr. cramer, from western michigan university. >> i love western michigan. they often have -- they like real money. what's up? >> caller: symbol gti, is a cliffhanger or cliff winner? >> no, it's a complete industrial which needs the cliff to be entirely resolved. or it is going to fall off a cliff. you got to stay close to washington. that's the kind of company that
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does terribly if the economy slows down. let's go to sue in california. sue? >> caller: american power, amt. >> i wish it would pull back so i can -- >> buy, buy, buy, buy, buy. >> it must be bought. one of the best stories out there. nick in ohio? nick? >> caller: jim, i'd like to give you a buckeye boo-yah. >> hey, congratulations on being undefeated. >> caller: no doubt. no doubt. i would like your analyst opinion on sprint. >> okay. remember, sprint's doing a complex deal with softbank. you're going to be able to get cash back wherever. suffice to say i like the stock. if you see it go down, that's because of the combination of the arbitrage, not because it's doing badly. i need to go to charlie in minnesota. charlie? >> caller: boo-yah, mr. cramer, from the frigid north on the edge of the prairie. how are you doing? >> real good. i'm kind of in the not so frigid northeast on the edge of nothing. what's up? >> caller: just curious what your thought is on hospitality properties. hpt. with the bountiful yield.
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over 18%. >> people are concerned about that company not being able to make the numbers. i say we need to do more work before i opine on it. whenever i see 8%, i break out my red flag and i don't mean the challenge flag that takes away my own, you know, touchdown -- let's just say the lions have to be feeling that. let's go to brad in illinois. brad? >> caller: hey, jim. i'm in chicago, but i have to give a detroit lions bad call boo-yah to you. >> i agree with that entirely boo-yah. what's up? >> caller: a couple speculation stocks. one is exel. >> what are your thoughts? we like exel. that's a good situation. >> buy, buy, buy. >> it is speck. it's entirely speck. i need chad in california. chad? >> caller: boo-yah, this is chad call from sunny california. how are you? >> how are you? >> caller: great. how about ng? >> no, no, no, man. i ixnaned that one. this one has no game. nj stan
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ng stands for no game. it's got no game. let's go to mike. >> caller: big boo-yah from denver. >> broncos look good. >> caller: i really enjoy your show. i can tell you're a man who loves his job. >> i sure do. >> caller: i want to say hi to patty and randy in denver. my question is about nvidia. >> tell patty and ran tdy that stock is doing absolutely nothing. i don't have a catalyst. it's a very expensive stock. john in pennsylvania. john? >> caller: hello, jim, a great big boo-yah from quakertown, pennsylvania. >> quakertown, the only place i ever had a fistfight in in a track meet. can you imagine? >> caller: that's great. >> the quakers, yeah. yeah. quakers give you a pounding. what's up? >> caller: listen, suburban propane. nice dividend yield. a hold cough. t off. >> the propane business is so competitive. >> sell, sell, sell, sell, sell. >> right near quakertown, they're giving away propane in your area. be careful on that stock.
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susan in arizona. susan? >> caller: hey, jim, it's in phoenix. i want to know about cirrus logic. am i stuck with it? a few weeks ago. >> it can go higher. if you want a play on apple, which is why everyone buys sears, you should buy apple. i need one more. i need to go to melanie in colorado. melanie? >> caller: oh, good evening, jim. i'm in the high rocky mountains of colorado. >> okay. >> caller: and my stock is phillips 66. >> oh, man, that is the peyton manning of stocks and that means it's positive. >> buy, buy, buy. >> i like phillips 66. i would buy it right here. and that, ladies and gentlemen is the conclusion of the "lightning round." >> the "lightning round" is sponsored by td ameritrade. coming up, breaking the banks? they are a leading force in the market's clines and declines. tonight, cramer is diving into the financial sector with one of the industry's founding fathers.
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looking to break into the banks? don't miss this exclusive. all coming up on "mad money." and his new boss told him two things -- cook what you love, and save your money. joe doesn't know it yet, but he'll work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. he'll start investing early, he'll find some good people to help guide him, and he'll set money aside from his first day of work to his last, which isn't rocket science. it's just common sense. from td ameritrade.
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there aren't be businessmen who built an incredible revolutionary brand from the ground up, but what's even more rare is to find someone who's done it twice. that's why we're thrilled to have a chance to learn from vernon hill tonight. hey, for those of you who don't know vernon, oh, you've got -- you'll be blown away. this is a guy who created commerce bank, building it from a single branch which he calls a store in 1973 into the fastest growing banking franchise in america for decades. by focusing on great customer service. i was a customer. and making the experience of going to the bank painless or even enjoyable. i threw a cocktail party at one of his banks. something that ultimately led to a huge return for investors, as commerce sold out to td bank in 2007, and was the absolute top of the banking cycle. and now hill is once again revoluti revolutionizing the world of retail banking. two years ago he opened metro
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bank with 12 branchs in greater london, expected to open eight more by end of the year. in britain, five banks control 80% of the retail market. sounds like they treat their customers poorly. hill understands the power of customer service. metro bank is bringing in new accounts and taking in new deposits faster than commerce bank used to. don't forget, he's doing this in a hostile environment. britain is in an austerity induced recession now. you wouldn't think this is a great time to open a bank. hill's customer friendly model is so driven these big picture negatives don't seem to matter. hill's new book "fans, not customers: how to create growth companies in a no growth world" hit the u.s. shelves today. i recommend reading it. i have. when somebody is this good, you want to learn everything they have to teach you. this is like danny myers' book. okay? remember that one. "setting the table. ""let's talk to the man who's the greatest banker of his generation. mr. hill, welcome to "mad money." great to see you, vernon. have a seat. all right. now, i remember commerce as one of the greatest stocks i ever
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owned from my hedge fund. we can't get into metro yet, but describe what metro is doing. there hasn't been a lot of new banks in london in a long time. >> they're the first new bank in britain since 1830. 1830. and it's another commerce-type model. open, friendly, and inviting. the brits have embraced something that's brand new. our success has been much more than i expected, and we are making banking fun again. >> okay. when you say making banking fun again, britain is in a recession. they hate their banks. they beat up on all the banking executives over there. why aren't you just part of another bank that people hate? >> we're the element of change. we're the disrupter in the market. and the book is about how you create great firms by creating great brands. >> now, when you say someone wants to go to the bank, i mean, i don't think people remember how exciting it was when you first opened your bank. if i go to a bank like you
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mentioned one bank thinking about opening longer hours. which i love. what is the difference between you and your competition? >> we like to think we appleized the banking business from the way we opened to the way we operate, to the location. retailing today has to be about fun. there's no reason that banking can't be about fun. and part of the reason is taking away every stupid rule. whether it's when you're open or whether you get to bring your dogs. it's about making it a retailing experience. >> now, there's got to be these other banks must -- i mean, i remember when you first came to new york and everyone was betting against you. i bet with you. because the other guys had banks on the second floor. they didn't have the right location. these banks, there's five banks. they're very powerful. aren't they going to try to move to crush your bank? >> well, as we grew here in america, we went through four stages. first of all, they would say we're too small to matter. stage two is they only get the accounts we don't want. the third stage is the one i like the best, when they get
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big, they'll get just as bad as us. and the fourth, and the fourth step was, oh, my god. and we're still in the first stage from britain, but we're not in britain to be a better uk bank. we're out to completely redo the way banking is delivered in britain. >> now, i think people have to understand that probably say, he must lose money on everything, but you got a model that you're -- that your stores actually don't pay the customer as much on the deposit because you believe that the customer actually is more of a neiman marcus customer, of a -- in other words, they're willing to accept they may have to pay a little more. they just want to be pampered. >> i would say it's slightly differen different. >> okay. >> our model says price isn't the only thing that matters. >> okay. >> it's the total value experience. and apple is the best current case. no one buys apple products for price. they get something else. so our entire model is about the total experience, and while
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we're fair about the rates, we're not a rate-driven model. >> okay. you mentioned a couple other people. home depot, arthur blank you mentioned. you mentioned howard schultz. why are they important to a bank? one's a coffee shop. one is a do it yourself retailer. >> why are people in manhattan paying howard schultz $5 for a cup of coffee when they can walk outside and buy a cup of coffee for $1.50? there's more to the starbucks experience than just coffee. it's the experience. it's the location. it's everything. >> now, i know that those who got in in commerce when it started in 1973, and they put $10,000 in, they ended up with $4.7 million. it's one of the greatest success stories. it may be the greatest, certainly the best bank success story ever. can they get into metro? >> metro is a private firm now, raised primarily with american funding, but we will -- we plan to list on the main london stock exchange in 2014.
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>> okay. now, vernon, you're also an observer in the united states and we've been focusing on this fis acal cliff, what can happenn our country if we don't get the right budget, if all taxes go up at the same time and spending cuts. you're a banker who understands not just the 20% who are wealthy, but the 80% who are trying to get wealthy. do the 80% do particularly badly on the fiscal cliff? >> i would answer your question slightly different. i got to live the american dream. built a business from nothing to real size by providing what the consumer and the businessman wanted. i'm scared to death that america is losing that ability. we see it in the banking business where the american banking environment is much tougher to deal with than even the uk, british environment which is much more friendly to business. i'm afraid that as the government turns the screws on the large banks, they're going to destroy the regional and
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small bank which really drive the american economy. >> it's a tough, it's a tough sentence, and i know that you understand the small guys, because you work with them to become large guys. and then they're loyal to you forever. >> correct. >> i'm sure the same thing is going to happen in london. i want to thank vernon hill. remember, "it's fans, not customers." this is the right book for the right time. "mad money" is back after the break. thank you, vernon. oh, hey mike. what are you up to? oh, just diagramming this accident with my state farm pocket agent app.
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you can also get a quote and pay your premium with this thing. i thought state farm didn't have all those apps? where did you hear that? the internet. and you believed it? yeah. they can't put anything on the internet that isn't true. where did you hear that? [ both ] the internet. oh look. here comes my date. i met him on the internet. he's a french model. uh, bonjour. [ male announcer ] state farm. more mobile than ever. get to a better state.
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we always forget about alcatel. the gigantic telephone equipment maker. every time we think this is the moment to buy, buy, buy tech users like a hewlett-packard or research in motion or nokia, the last two of which were upgraded today. we forget about the financial disaster that's right in our faces. the company that succeed eed lucent at one point the largest telecom manufacturer in the world. i'm reminded of this because right now they're trying to range a lifeline loan from goldman sachs, shore up its balance sheet, keep it alive. something that caused the stock to jump 8% on friday before settling back down today to $1 and change. at one time alcatel lucent strolled across the earth. this equipment maker including the bell labs division of at&t, unbelievable, the brains.
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all the switching, all the fiber, all the copper. the greatest install base in the world. the best international brand name. believe it or not, it could rival cisco, show up nortell, every day of the week. remember them? you always you it had the inside track on the verizon and at&t deals. that point southwestern bell. as those companies grew and grew. patricia rue sew showed me lte in its infancy. next generation cell phone technology all to itself. alcatel lucent had more nobel laureates than any on earth. lucent seemed invincible. previous ceo inflated revenues. right about when the stock traded at a split of $80. something akin to what hewlett-packard accuses -- in its current wranglings. it was considered the acknowledge leader in all wireless and wireline equipment. until it wasn't. until cisco passed it by on routers and switches, until the design of the cell phone,
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itself, became more important than the network, until the cloud emerged and internet highways, until innovation, much better than mouse traps, everywhere, passed it by. the company hung on. lucent's merger with alcatel was meb meant to make it so it could win business in europe as it did here. the brand name, the finest brand name in the world, bell labs, became like kodak. the patents, they got millions of them. all those nobel prize winners. the patents are for equipment that became obsolete years ago. you could have been a buyer of alcatel lucent all the way down. there so many reasons to do so. i mean, just as there are with nokia or research in motion or hewlett-packard. we hear them every day. there's value all over the place. when you get in the downward death spiral, it's impossible to break out of. the only one i've seen rescued in this ever ra ra is sprint.
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one last thing. throughout this period, many thought lucent and then lucent alcatel had to make it. some still do. the market says it won't. i think the market's right. stick with cramer. taking control of your financial destiny is smart. why would you go it alone? >> something that has a much larger bearing on you and the stock market as a whole. >> let cramer be your guide. your sounding board. >> i'm having a hard time with my favorite stock. >> i know you can beat these professionals. >> and your coach on the road to financial independence. "mad money" weeknights on cnbc. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process --
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you know i'm kind of reeling by what vernon hill said at the end of the interview. he said, great banker, created commerce bank, the greatest, probably the greatest performer of all bank stocks. and he said it's the little and medium-sized banks that are getting hurt. by regulation. i had always thought they were doing pretty well, frankly, but you know what, when i look at the prices a lot of the regionals, mid-size regionals have completely stalled here. maybe vernon hill is on to something and they should take his conversation right to washington as part of the overall fiscal cliff overregulation sto.

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